Carl S. Warren
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(1) current liabilities and (2) longterm liabilities. Current Liabilities Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities. The most common liabilities in this group are notes payable and accounts payable. Other current liabilities may include Wages Payable, Interest Payable, Taxes Payable, and Unearned Fees. Note: Two common classes of liabilities are current liabilities and longterm
experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 68 Chapter 2 Analyzing Transactions Transaction Dec. 31 Fees earned on account totaled $1,120 for the second half of December. Analysis This is similar to the transaction of December 16. This transaction is recorded as a $1,120 increase (debit) to Accounts Receivable and a $1,120 increase (credit) to Fees Earned. 31 Journal Entry Accounting Equation
debit and the credit were journalized and posted as $1,300. (a) Would this error cause the trial balance to be out of balance? (b) Would the trial balance be out of balance if the $3,100 entry had been journalized correctly but the credit to Cash had been posted as $1,300? 8. Assume that Timberline Consulting erroneously recorded the payment of $9,000 of owner withdrawals as a debit to Salary Expense. (a) How would this error affect the equality of the trial balance? (b) How would this error
estimates the future warranty costs that it will incur on the vehicle and accrues a warranty expense. Accruals for estimated warranty costs are based on historical warranty claim experience, which is adjusted for changes such as offering new types of vehicles. For example, Ford adjusted its warranty costs when it began selling its new fuel efficient Ford Escape Hybrid. The Ford Escape Hybrid has a gas-electric engine that automatically shuts off when the vehicle is stopped. The Escape also uses
a vertical analysis of two years of income statements for J. Holmes, Attorney-at-Law, is shown below. Describe and illustrate the use of vertical analysis in evaluating a company’s performance and financial condition. J. Holmes, Attorney-at-Law Income Statements For the Years Ended December 31, 2012 and 2011 2012 Fees earned Operating expenses: Wages expense Rent expense Utilities expense Supplies expense Miscellaneous expense Total operating expenses Net income 2011 Amount $187,500 Percent